Exercise 16Regard the problem of capital adequacy under the Solvency II regulation. By given assets andliabilities the insurer X has calculated quantiles of company's aggregated risk in accordancewith the Solvency II methodology. The results are depicted below:Quantile's orderAmount of risk (in $ 1000)0,98512 0000,99016 0000,99519 5000,999522 500X estimates that expected value of the total claims amounts to $ 10 million.Fill a table below and justify the figures you have inserted.ItemsIn $1000Total liabilities23 000Thereof: technical provisions and reserves?other liabilitiesrequired shareholders' fundfree assets?{Hint: The quantile of order 0,995 defines the required amount of assets. Thus free assetsequal to 3 500. The reserves consist of the expected value of claims and the risk premium,thus R=10 000+ 6%*(19 500-10 000), Finally, the required shareholder's fund is 8 930.}

Provision and Reserve =10000+6%*9500=10570 Free Assets = 23000-19500 =35000 Shareholders Fund = 8930

Answered: 0,985 12 000 0,990 16 00C 0,995 19 50C…

Business

Accounting

0,985 12 000 0,990 16 00C 0,995 19 50C 0,9995 22 50C

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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